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Politics

China acts on intellectual property ahead of Trump summit

Patent appeals will go directly to top court, boosting transparency

Intellectual property rights, along with the large trade imbalance, are one of the biggest issues that currently stand between China and the U.S.   © Reuters

BEIJING -- China will give its supreme court a greater role in intellectual property cases regarding patents and trade secrets, starting in January, as it aims to increase transparency and consistency in response to international criticism.

Protecting intellectual property rights is a key sticking point in the Sino-American trade war. Chinese President Xi Jinping could explain the change to U.S. President Donald Trump at their planned summit in Argentina on Saturday as an olive branch to ease tensions.

As patent applications increase in China, so have intellectual property disputes. The year 2017 alone logged 237,000 cases, which is 25 times the amount in Japan, for instance.

Intellectual property cases in China are generally first brought to courts in each region or the three courts dedicated to intellectual property. Decisions can then be appealed to provincial-level high courts, which generally have the last word.

But provincial courts tend to favor companies based within their borders. "We still see these courts rule in favor of local companies on unreasonable grounds," said Kenji Kuroda, a lawyer knowledgeable about intellectual property in China.

A case goes to the Supreme People's Court only in special circumstances, such as key evidence emerging after the high court ruling.

Under the new system, appeals tied to matters requiring significant specialized knowledge -- such as patents, trade secrets, antitrust and integrated-circuit designs -- will bypass the provincial courts and go straight to the supreme court.

Copyright and trademark disputes, which make up about 80% of all intellectual property cases in China, will still go to provincial high courts. 

"There are questions regarding the consistency of decisions, and provincial courts in particular have limited expertise in these matters," said Yoshifumi Onodera, an attorney.

Such favoritism concerns foreign players as well, since more Chinese companies have begun suing foreign-backed players operating in the country in recent years. A Sony unit was sued in a patent infringement case by a Chinese communications company in 2017. While the Sony unit argued that the patent had expired, both the first and second rulings ordered it to halt the sale of mobile phones and pay damages to the Chinese company. Toshiba has also lost its first trial on a case regarding a USB technology patent.

Taking appeals directly to the supreme court will help mitigate regionalism and prevent disparate treatment of domestic and foreign companies, Hong Kong-based lawyer Liu Xin said.

But logistical hurdles remain. The change means that the supreme court will be handling about 5,000 cases a year on intellectual property, requiring 50 to 100 judges. But only about 20 can now adjudicate in this area. It is crucial for the court to secure more judges with the necessary expertise, or the integrity of the judicial process will suffer.

The U.S. also accuses China of industrial espionage and forced technology transfers. But China refuses to even acknowledge these as problems.

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